Last week the Consumer Financial Protection Bureau released its annual report to Congress on the Fair Debt Collection Practices Act (FDCPA), as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In this fortieth anniversary of the enactment of the FDCPA by Congress, the CFPB reviews its actions as the first federal agency to have the authority to supervise non-depository institutions, including debt collectors, in the same manner that banks have long been examined.
Among the highlights from the report:
- The CFPB brought 10 new public enforcement actions involving debt collections in 2016, and continued litigation in three other cases that had been filed previously. In the cases that were concluded during 2016, $39 million was paid in restitution for consumers and $20 million was paid in civil penalties.
- February 23, 2016 - Citibank, N.A.
- February 23, 2016 – Citibank, N.A. et al.
- February 23, 2016 – Solomon & Solomon
- February 23, 2016 – Faloni & Associates
- April 25, 2016 – Pressler & Pressler, LLP, Sheldon H. Pressler and Gerard J. Felt
- April 25, 2016 – New Century Financial Services
- Septemeber 26, 2016 – TMX Finance LLC
- October 11, 2016 – Navy Federal Credit Union
- November 2, 2016 – CFPB, et al. v. MacKinnon, et al. (complaint filed)
- December 16, 2016 - Moneytree
- The CFPB filed amicus curiae briefs in two appellate court FDCPA actions (Arias v. Gutman, Mintz, Baker & Sonnenfeldt, PC and Bock v. Pressler & Pressler, LLP), and assisted the Solicitor General’s office in preparing two amicus briefs that were filed in the Supreme Court in cases implicating the FDCPA (Sherriff v. Gillie and Midland Funding, LLC v. Johnson). All four cases are still pending.
- The Federal Trade Commission (FTC), which shares enforcement responsibility for the FDCPA, brought or resolved 12 debt collection cases in 2016, including a focus on phantom debt collection and a sweep on unlawful text messages and emails as a means of collecting debt.
- In July 2016 the Bureau released an Outline of Proposals Under Consideration for debt collection, and convened a SBREFA panel to obtain input on how those proposals would affect small businesses.
- In January 2017 the Bureau released two studies on the debt collection market: a white paper about the Online Debt Sales market, and a report on Consumer Experiences with Debt Collection, based on the Bureau’s Survey of Consumer Views on Debt.
- Ongoing activities in supervision, complaint collection, and consumer education continued. No significant milestones were reported.
The report provides industry estimates including share of collections by business model (contingency, debt purchase, etc.) as well as a breakdown by industry breakdown (data provided by IBIS World, December 2016).
As to the outlook for the debt collection industry, the report states,
Consumer debt has continued to increase since 2013 and is approaching its 2008 peak. However, growth in consumer debt has been fueled primarily by increases in non-housing debt. In 2016 alone, credit card debt rose $46 billion, or 6.3%, student debt increased by $78 billion, or 6.3%, and auto debt rose by $93 billion, or 8.7%. Delinquency rates remain relatively stable, although they have not returned to their pre-crisis levels. However, the combination of these levels of debt and an economic downturn could lead to a substantial increase in the amount of delinquent and ultimately charged-off accounts.
Regarding consumer complaints, the Bureau reports that debt collection continues to be the most complained about product in the Consumer Response system. The report also shows that the most common issue continues to be “continued attempts to collect a debt that the consumer states is not owed.” However, complaints about “disclosures (or) verification of debt” increased by 36%.
Issues with disclosures or providing information sufficient to verify the debt was the second-most common issue selected by consumers in their complaints (see line 2 in Table 1). If a collector is covered by the FDCPA, the law requires collectors within five days of that communication to provide consumers with a written notice informing them, among other things, of their right to dispute debts.
Some consumers, however, complain that debt collectors do not provide this notice (23%). Most consumers who complain about the dispute process raise the concern that when they exercise their rights to dispute debts, collectors do not provide them with documentation that consumers believe collectors need to verify the debt (69%). The complaints related to disputed debts also reveal confusion on the part of consumers as to when and how they can dispute a debt.22 Other consumers report that the company did not disclose that the communication was an attempt to collect a debt (7%).
On the other hand, complaints about communication tactics decreased 11% from 2015, and complaints about collectors taking or threatening illegal action dropped by 16% from 2015. Together, these categories represented 15% of complaints in 2016.
The Bureau reports that 82% of debt collection complaints were either “closed with explanation” or “closed with non-monetary relief.”
Supervisory activity in 2016 uncovered the following issues within “one or more collectors”:
- Miscoding of accounts unsuitable for sale by debt sellers
- Unlawful convenience or collection fees
- False representations
- Communication with third parties
It is interesting that this report was released with no fanfare, and no announcement. It just appeared. With that said, there is nothing new here. The report is simply a recap of activities that were well reported about in 2016 and the first few months of 2017.
Worth noting are the trends in consumer complaints, and the fact that most continuing issues are related to the ability for creditors and collectors to share information – with each other, and with consumers. While there will likely always be a certain number of complaints related to communication tactics, these are in the minority; the vast majority relate to disputes. It is no wonder that the Bureau is considering first party rulemaking along with third party.
Also worth noting is the comparatively small effort made by the CFPB at public education. The report points the fact that as of January 2017, debt collection was one of the two most-viewed categories in Ask CFPB. The report does not mention how many views there were in total. Beyond that, the CFPB points to the five sample letters posted in 2013 for consumers to use in communicating with debt collectors and states that they’ve been downloaded over 389,800 times since tracking began in June 2014 (again, “I need more information about this debt” and “I do not owe this debt” are the most popular by far).
The balance of the report focusing on consumer outreach and education relates to Federal Trade Commission activity.